The Underachieved Solar Target Of FY17, What Went Wrong?

While the industry is cheering on the record-breaking wind capacity addition for the year for FY17, we still fall behind in our solar targets, which has been the government's favourite child.

As per the official data of the Union ministry of new and renewable energy (MNRE), against the targeted 12,000 MW (10,500 MW ground-mounted and 1500 MW rooftop solar) for grid-connected solar projects in 2016-17, 5,525.98 MW has been achieved. Cumulative solar capacity currently stands at 12,288.83 MW, against 6,762.85 MW as compared to the last fiscal, which is a great news for the solar industry overall and is impressive even if it falls short of the target.

However, let's talk about what happened to this particular fiscal's target. Was 12000 MW too ambitious for this fiscal or things didn't go as planned by the officials.

According to Amit Kumar, Partner, Renewables, PwC, the target of 12000 MW for solar was made on certain assumptions, one of the biggest being the solar parks, which failed to get operational by 2016.

"5000-6000 MW capacity addition was expected to come from solar parks. Two to three solar parks were already operational but the rest didn't take off as per the desired target. The main issue was the infrastructure which was not ready", says Kumar.

Outside the solar parks comes the Rooftop segment(1500 MW target) which didn't get the desired push especially from the DISCOMs. "The single most important reason for the underachievement of the renewable targets in the last fiscal year is the dismal performance in the solar rooftop segment. Economic reasons such as no economies of scale in rooftop and non-economic reasons such as poor contract enforceability, poor implementation of net metering policies by state agencies etc. are some of the major reasons behind the shortfall in the rooftop targets", says Manu Agarwal, Research Analyst, Centre for Energy, Environment and Water.

Kumar says the DISCOMs need financial incentives to encourage rooftop installations which would alleviate their concerns about loss of profitable customers and additional network investments.

The third major concern is the PPA signing and biddings which didn't happen as anticipated. According to Girishkumar Kadam, VP, Corporate Sector Ratings, ICRA and Power Sector Lead, the 2016-17 target for solar faced shortfall owing to the delays in tendering and PPA signing process. "There was a temporary lull in the sector post-Rewa. The authorities would be re-evaluating the project structure and there is going to be a bidding delay in the next fiscal as well".

"Post the tender, the winning developers should be awarded the LOA (Letter of Award) in 5 months and the PPA should be signed in the next 1 month, but that didn't happen. The same scenario cannot be predicted for the next set of targets", says Kadam.

There is now a downward concern, according to Kumar. The DISCOMs want a replication of what happened at the Rewa auction and are hesitant in signing the PPAs at tariffs higher that Rewa. All experts are of an opinion that Rewa was a result of unique conditions of land, payments, subsidies, created by the state which led to those record tariffs, a pure plug and play.
Raj Prabhu, CEO, Mercom Capital Group voices another hurdle of RPO Compliance and government policies which hindered this year's solar target, "The 12,000 MW goal was pretty aggressive but the government agencies were not equipped to handle it. Power demand is lacking and some states have to curtail power as there is no demand. Every time there is a new low bid, tender activity freezes as all states want the bids to get down to those levels. I think the investors and renewable energy companies are ready to invest and execute projects but hurdles are in the government machinery."

Going forward, Kumar says the sector could land into trouble post-2018 when we touch almost 20% of the installed capacity in solar. " There are major challenges- Grid stabilisation, Spinning reserves and storage. Who will incur the cost of all three?. India is in no position for storage innovation as we are dependent on countries like Japan for technology breakthrough."

"Getting to 175 GW by 2022 will be tough, it is a very aggressive target. The issue is, these targets are set to top-down from the central government without figuring out how states will be able to achieve this. DISCOM financials are in shambles and most would rather cut power than purchase and supply it to the customer", says Prabhu who terms the next 2 years crucial to see if the states can handle higher renewable generation.

However, Sabyasachi Majumdar, Senior Vice President, ICRA is optimistic of the overall targets and set up the government and predicts 7-7.5 GW of capacity addition for solar in 2018, amidst a very strong project pipeline via NSM (National Solar Mission) route. "A lot is under implementation. We should look at these targets from year to year basis. All the capacities for FY17 should be commissioned and the shortfall in the target should be made up in the next fiscal", says Sabhya.

Of the 5,526 MW added, only 2,803.77 MW had been commissioned till February end, but it was followed by a spurt of more than 2,700 MW in March 2017, which shows how the government is speeding up on its targets just in time to beat the year-end deadline.

Amidst all, the experts hail both centre and state specific policies giving momentum to the renewable energy, besides some unattended areas. "Under the national solar mission, the projects awarded via SECI have increased tremendously with amendments in the national tariff policy as well. The states have coined their own region-specific policies and targets showing active interests in bids and RPO targets", says Girish.

The targets of the government might seem too ambitious but aiming for the moon will at least make you land on the stars. 12,288.83 MW of cumulative capacity against 6,762.85 MW compared to the last fiscal, being this FY17's shining star.